Goldman Sachs Sets Low Fees to Generate Interest in New ETFs

(Bloomberg) -- Goldman Sachs, rarely thought of as a low-cost option, is seeking to be just that with a new line of exchange-traded funds.

The firm will charge an expense ratio of 9 basis points on the large-cap version of its so-called ActiveBeta ETFs, according to a regulatory filing Friday. That means investors will pay $9 in annual fees for every $10,000 invested, lower than the 9.5 basis points charged by the world’s largest ETF, the SPDR S&P 500 fund.

Goldman Sachs is seeking to capitalize on the growth in ETFs as part of its goal of increasing investment-management revenue by more than 10% a year. The bank announced pricing for six funds focused on so-called active beta strategies, or weighting indexes based on valuation or growth instead of size or share price.

Goldman Sachs expects to begin issuing funds this year, a person briefed on the matter said in June. The effort is led by Michael Crinieri, who moved from the New York-based bank’s trading division in 2014. The firm hired BlackRock Inc. veteran Tony Kelly as head of product development for the unit earlier this year.

The large cap fund’s expense ratio is well below the median of 50 basis points for large-cap U.S. ETFs, according to data compiled by Bloomberg. Goldman Sachs has no intention of raising the fees, said Andrew Williams, a company spokesman.

EUROPE, JAPAN

The five other ETFs Goldman Sachs is starting will have an expense ratio of 45 basis points or less. The bank is offering a U.S. small-cap ETF, as well as ones investing in equities in Europe, Japan and emerging markets. Another fund invests in stocks in a number of countries outside the U.S.

Last year, Goldman Sachs bought Westpeak Global Advisors LLC to spur growth in its beta products after seeing more demand from clients. Beta refers to how much an asset’s price moves in relation to the broader market and typically describes products that track an index rather than invest based on a manager’s views.

The ETF industry took 23 years to reach $2 trillion in assets and just two more years to reach $3 trillion, which it did in May, according to research and consultancy firm ETFGI.